DETECTING AND MANAGING CONFLICTS OF INTEREST IN SPONSORED RESEARCH
October 30 – November 1, 2002
Joan S. Leonard
Vice President and General Counsel
Howard Hughes Medical Institute
Chevy Chase, MD
VARIETIES OF CONFLICTS
I.
BACKGROUND
A.
Incentives for collaborations with industry
1.
The proportion of academic research being funded by industry is large and
growing. In 1998 it was nearly $2 billion, or about 9 percent of all research
performed at colleges and universities, and that amount is likely to double over
the next 10 years. (“Working Together, Creating Knowledge,” The UniversityIndustry Research Collaboration Initiative, Business-Higher Education Forum,
2001, 19-20.)
2.
Federal enactments, such as the The Bayh-Dole Act of 1980, have focused
academic research institutions on the commercial potential of its research
activities. NIH-sponsored programs such as SBIRs and STTRs have encouraged
joint research projects between academic institutions and smaller companies.
3.
State and local governments have continued to look to academic research
institutions as sources of economic development at the state and local level.
Some have even tied grant funding to an institution’s commitment to job creation,
presumably through academic/industrial collaborations.
B.
Obstacles to collaborations with industry
1.
Despite similarities in their research interests and activities, academia and
industry are not natural partners, and their collaborative relationships can generate
significant tensions because of conflicting missions.
a.
Highly publicized incidents of unfortunate incidents occurring
within the context of these collaborations have greatly increased the public
awareness of the potential for conflicts of interest. A few lawyers have
responded by recruiting individuals to class action lawsuits.
2.
In the wake of expressions of Congressional interest in the area, some
academic representatives, including the Association of American Universities and
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the Association of American Medical Colleges, have responded with their own
proposals for recognizing and managing such conflicts.
3.
In a period of heightened scrutiny, it is important that academic
institutions both identify and manage the conflicts that may arise in the course of
their research and technology transfer activities, particularly when industry
funding is involved.
II.
IDENTIFYING CONFLICTS OF INTEREST IN SPONSORED RESEARCH
A.
What is a conflict of interest?
1.
“A conflict of interest is a set of conditions in which professional
judgment concerning a primary interest (such as a patient’s welfare or the validity
of research) tends to be unduly influenced by a secondary interest (such as
financial gain).” Thompson, DF NEJM 328:573-576, 1993
2.
NIH Definition: “A potential conflict of interest exists when an
investigator has significant financial interests which could lead an independent
observer to reasonably question whether the design, conduct or reporting of
research might be influenced by the possibility of personal gain (individual or
immediate family).
B.
What is sponsored research?
1.
For purposes of this presentation, sponsored research is any arrangement
in which a for-profit entity provides funding for academic research in exchange
for rights in the research results.
2.
Such arrangements may take varied forms, including research
collaborations between academic and company scientists, sponsored research
with little or no involvement of company scientists, and clinical trials, but all
operate under contractual arrangements that delineate the rights and obligations of
the parties.
III.
CULTURAL DIFFERENCES IN SPONSORED RESEARCH
A.
Sponsored research is a joint endeavor between two entities whose fundamental
missions and operating conventions are not naturally compatible.
1.
Universities by law and custom have a duty to create and publicly
disseminate new knowledge and train the next generation to do the same;
corporations by law and custom have a duty to use private risk capital to create
wealth for the benefit of the shareholders.
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2.
IP protection for government-funded research is controlled by public
policy as expressed in Bayh-Dole and PHS regulations; IP protection for
corporations is governed by obligations to shareholders.
3.
University researchers are permitted to market their own research services
and resulting IP to outside entities via consulting arrangements; company
researchers’ IP must be exclusively owned by the company.
B.
Attempting to coordinate the priorities of all parties when fundamental interests
are not aligned creates opportunities for conflicting interests.
IV.
VARIETIES OF CONFLICTS -- INDIVIDUAL CONFLICTS
A.
Even in the absence of direct involvement with a company, investigators have
multiple roles.
1.
Independent researcher – committed to independent, curiosity-driven
objective research pursued with the intent of creating new knowledge and
discoveries in the field
2.
Grantee – applicant for/recipient of governmental and other not-for-profit
research funding, subject to certain rules and conditions
3.
Author – disseminator of unbiased research findings in peer-reviewed
journals, so that others may test and build on those findings
4.
Colleague – Member of the research community with expectations of
knowledge and resource sharing according to conventional norms
5.
Inventor – creator of intellectual property, which may be patented and
licensed
6.
Mentor – teacher providing guidance and training to graduate students to
enable them to earn their doctoral degrees and go on to research careers of their
own
7.
Teacher -- provide classroom instruction to institution’s students
B.
The demands of these roles are never perfectly congruent, and may sometimes
compete. For example,
1.
Investigators may forego their most exciting (but risky) proposals in order
to tailor a grant proposal to what they believe can be funded or will provide an
appropriate project for a graduate student
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2.
Investigator may delay or tailor publication to accommodate protection of
intellectual property and preserve future development of findings.
3.
Investigator may wish not to share proprietary reagents because of
obligations to licensees.
C.
All of these competing desires are aspects of the investigator’s single relationship
to the academic institution, and managing them is part of any multifaceted employment
situation. Thus, for purposes of the definitions above, there is no obvious “primary” vs.
“secondary” interest issue; they are all aspects of a single employment relationship and
resolved managed as such.
D.
The investigator’s competing interests are slightly more complex when the
institution licenses the investigator’s technology to an unrelated company.
1.
Royalty recipient – beneficiary of some portion of consideration received
from licensing of investigator’s intellectual property. In the absence of any
consulting or other relationship with the licensee, this role derives from the
investigator’s institutional relationship and is dependent upon it.
E.
Things get substantially more complex when investigators take on one or more
additional roles defined by their private consulting contracts with companies.
1.
Consultant – provider of specialized scientific expertise to companies in
exchange for personal compensation.
2.
Funding recipient – recipient of corporate funding for academic laboratory
research
3.
Shareholder – equity owner of a company for which the investigator
consults.
4.
Company director -- company official with statutory fiduciary duties of
care and loyalty to shareholders
F.
When one or more of these roles is added to the multiple roles above, the set of
conditions described in the conflict of interest definition set forth above may come into
play.
G.
The determination that such a set of conditions exists does not call into question
or pass any judgment on anyone’s motives or behavior; conflicting interests are inevitable
and are nothing more nor less than a reality embedded in the circumstances of the modern
research environment. If an academic research institution organization is to fulfill and
be perceived as fulfilling its primary institutional mission, it must have in place policies
that recognize and address this reality.
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V.
SETS OF CONDITIONS THAT MAY HAVE THE POTENTIAL TO AFFECT OR
APPEAR TO AFFECT PROFESSIONAL JUDGMENT
A.
A COMPANY SPONSORS AN INVESTIGATORS RESEARCH
1.
Institutional concern: Ensure that corporate funding does not divert
investigators’ research program from the institutional mission of creating and
disseminating new knowledge and training students.
(a)
Choice of research project; independent, curiosity-driven research
vs. research that serves short-term corporate objectives of research sponsor
(b)
Publication of research project results; prompt, full disclosure of
results vs. delays to permit protection of proprietary technology and
confidential information
(c)
Mentoring of graduate students; development of publishable
dissertation vs. confidentiality obligations to corporate sponsor
B.
THE INVESTIGATOR CONSULTS FOR THE SPONSOR
1.
Institutional concern: Ensure that that the investigator’s relationship with
the corporate sponsor do not interfere with institutional mission of creating and
disseminating new knowledge and training students.
(a)
Time and resource commitment; devoting required time and
research resources to academic duties vs. directing them to the benefit of
the company
(b)
Choice of research project; independent, curiosity-driven research
vs. research that will benefit consultee company’s R&D program
(c)
Publication of research project results; prompt, full disclosure of
results vs. diversion of results to consultee company.
(d)
Mentoring of graduate students; development of publishable
dissertation vs. providing employees and providing valuable trade secrets
for consultee company. Potential “second class citizenship” for students
not involved in work of interest to the company.
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C.
THE INVESTIGATOR’S INVENTION IS ALSO LICENSED TO THE
SPONSOR
1.
Institutional concern: Ensure that that the investigator’s relationship with
the corporate sponsor do not interfere with institutional mission of disseminating
new knowledge for the benefit of the public
(a)
Choice of licensee; Shopping technology broadly to find licensee
best suited to commercialize vs. steering to consultee company
(b)
Choice of research project; independent, curiosity-driven research
vs. research that will enhance value of already licensed technology
(c)
Background technology; Preserving licensing autonomy of other
investigators vs. satisfying company’s desire/need for exclusivity
D.
THE INVESTIGATOR ALSO HAS STOCK IN (AND MAY BE FOUNDER
OF) THE SPONSOR
1.
Institutional concern. Ensure that that the investigator’s relationships with
the corporate sponsor do not interfere with institutional mission of creating and
disseminating new knowledge and training students.
(a)
Choice of research projects; independent, curiosity-driven research
vs. research that will benefit consultee company’s R&D program and
enhance consultant’s equity investment
(b)
Time and resource commitment; devoting required time and
research resources to academic duties vs. directing them to the benefit of
the company
(c)
Publication of research project results; prompt, unbiased
publication of results, even if negative to company, vs. protection of
equity investment
(d)
Choice of licensee; shopping IP broadly vs. pipelining
(e)
Mentoring of graduate students; in addition to publication issues,
incentives exist to direct students to project of value to the company and
employment with the company.
The greater the stock ownership, the more powerful the secondary interest
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E.
THE INVESTIGATOR ALSO SITS ON THE BOARD OF THE START-UP
SPONSOR
1.
Institutional concern: Ensure that that the investigator’s primary
commitment to the mission of the academic institution is not unduly influenced by
conflicting legal obligations to a corporate entity
(a)
Conflict of institutional commitment; directors have fiduciary
obligations to bring corporate opportunities to the company; if company
is young, demands on directors’ time and attention may be very heavy
F.
THE INVESTIGATOR IS ALSO CONDUCTING A CLINICAL TRIAL FOR
THE SPONSOR
1.
Institutional concern: Ensure that that the investigator’s primary
commitment to the welfare of patients is not unduly influenced by company’s
desire for favorable results and prospects of personal gain
(a)
Human subject protection; primacy of the patient’s interest when
recruiting , consenting, enrolling patients, reporting adverse events,
interpreting data vs. interest in meeting enrollment targets and moving
company’s investigative drug or device to the next phase of
commercialization
VI.
VARIETIES OF CONFLICTS – INSTITUTIONAL CONFLICTS
A.
As noted above, the core mission of academic research institutions is to create and
disseminate new knowledge through the conduct and publication of unbiased and
objective research and train the next generation of researchers to do the same. At the
same time, institutions are expected to involve themselves in recruiting funders,
commercializing inventions, and contributing to economic growth.
B.
Thus, like investigators, academic research institutions have many roles. And like
investigators, institutions can find that a set of conditions may develop in which
institutional judgments regarding a primary interest, carrying out the core mission of the
institution, may be unduly influenced by secondary interests, such as increasing the
institution’s endowment.
C.
SETS OF CONDITIONS THAT MAY HAVE THE POTENTIAL TO AFFECT
OR APPEAR TO AFFECT INSTITUIONAL DECISIONMAKING
Because these situations tend to be analogous to the investigator situations set forth in
section V, above, in the interest of brevity, they will simply be listed, without
enumerating the specific ramifications.
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D.
A COMPANY SPONSORS AN INVESTIGATORS’ RESEARCH
1.
Institutional concern: Ensure that corporate funding of an investigator’s
research program does not interfere with the institutional mission of performing
objective and unbiased research, disseminating new knowledge, and training
students.
E.
THE INSTITUTION HAS LICENSED INVENTIONS TO THE SPONSOR
1.
Institutional concern: Ensure that scope of rights granted in the license
and consideration to be received from license do not interfere with institutional
mission of performing objective and unbiased research and disseminating the
results for the public benefit.
F.
THE INSTITUTION HOLDS STOCK IN THE START-UP SPONSOR
1.
Institutional concern. Ensure that that equity ownership of the corporate
sponsor does not interfere with institutional mission of performing objective and
unbiased research, disseminating new knowledge, and training students.
G.
THE INSTITUTION IS REPRESENTED ON THE BOARD OF THE STARTUP SPONSOR
1.
Institutional concern: Ensure that its fiduciary corporate responsibilities
do not interfere with institutional mission of performing objective and unbiased
research, disseminating new knowledge, and training students.
H.
THE INSTUTION IS ALSO THE SITE OF THE SPONSOR’S CLINICAL
TRIAL
1.
Institutional concern: Ensure that that the institution’s primary
commitment to safeguarding the welfare of patients is not unduly influenced by
company’s desire for favorable results and the institution’s prospects of financial
gain.
VII.
OTHER LEGAL ISSUES RELATING TO SPONSORED RESEARCH
As described above, sponsored research can create conditions that require institutional
policies to ensure that individual and institutional conflicts do not undermine
fundamental institutional missions. In addition to these concerns, sponsored research
agreements can create legal obligations that may conflict with other institutional
obligations that arise as a part of its investigators’ research programs.
A.
CONFLICTING GRANTS OF RIGHTS
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1.
Institutional concern; Ensure that the institution can meet its contractual
obligations
2.
MTAs. In the course of research projects, investigators often seek access
to a company’s proprietary material or research tool. Typically, a company is
willing to provide such a material or tool only if the institution enters into
material transfer agreement (“MTA”), under which the institution agrees to grant
rights to the provider, e.g., an exclusive option to license intellectual property
resulting from the use of the material. If exclusive rights in a commercially
sponsored project have been promised to another company in connection with a
sponsored research agreement, institution will have to either ask the investigator
to forego the use of the material or risk breaching its contractual obligations to the
sponsor.
3.
Collaborations with academic colleagues. It is not unusual for academic
colleagues with complementary research interests to establish informal
collaborations and produce jointly invented intellectual property. If these
colleagues are funded by different companies, it is likely that exclusive rights in
their inventions have been already promised.
B.
INSIDER TRADING
1.
Under section 10(b) of the Securities Exchange Act of 1934 and related
Rule 10b-5, it is unlawful to purchase or sell a security

while aware of material nonpublic information about that security or issuer,

in breach of a duty of trust or confidence that is owed directly, indirectly, or
derivatively to the issuer of the security, shareholders of the issuer, or to any
other person who is the source of the material nonpublic information,

with the intent to deceive, manipulate, or defraud, or with reckless disregard
of whether deception, manipulation, or fraud is taking place.
2.
Investigators, in their capacity as institutional employees, may obtain
material nonpublic information under an express or implied duty to hold that
information in confidence. Examples include information about a company or its
products or discoveries that an investigator may learn in the course of a scientific
collaboration, or that a tech transfer officer may learn about a potential license of
a discovery to a public company. In each of these cases, the institution would
likely be treated as in possession of the information.
3.
Rule 10b5-1 provides that an entity that trades in a company’s securities
while in possession of material nonpublic information about that company can
avoid violating the insider trading laws if it can show that
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(a)
the individual or individuals responsible for making investment
decisions on its behalf were not aware of the information, and
(b)
the entity had reasonable policies and procedures in place to
prevent insider trading.
4.
Because of the potential liability and the fact that it can effectively be
minimized, if not eliminated, by adopting reasonable policies and procedures, it
may be prudent for institutions to adopt an insider trading policy.
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INSTITUTIONAL RESPONSES
HHMI AND AAMC
I.
HOWARD HUGHES MEDICAL INSTITUTE
HHMI’s Mission. HHMI expects its scientists to pursue innovative, cutting-edge research on
fundamental biomedical questions and to take scientific risks in the process. HHMI’s policies
on intellectual property and conflict of interest are designed to minimize any non-scientific
influences on its investigators’ research programs.
II.
HHMI POLICIES
A.
HHMI has policies relating to intellectual property (IP) and conflicts of interest
(COI) that apply to consulting, research collaborations with industry, transfers of
materials into and out of the laboratories, and licensing. These policies, as well as model
agreements implementing the policies, can be found at
http://www.hhmi.org/ogc/guide.html.
B.
The HHMI policies are generally similar to those of the institutions with which
HHMI collaborates, with two major exceptions.
1.
Because of its funding model, HHMI does not permit commercial funding
of research in its laboratories.
2.
Investigators must obtain HHMI’s prior review and written approval
before entering into any consulting relationship with a for-profit company.
C.
HHMI’s policies in each major area that are specifically directed to managing
conflicts of interests are summarized below.
D.
CONSULTING
1.
As noted above, HHMI investigators who seek to consult for a company
must first obtain written app roval of the consulting agreement. A copy of
HHMI’s model consulting agreement is included in the summary of HHMI
intellectual property policies on the Institute’s website. In general , HHMI treats
any compensated service by an investigator for a company as consulting. HHMI
has four core concerns in regulating consulting relationships.
(a)
Reduce to a minimum the potential for a real or apparent conflict
of interest and preventing an inappropriately close relationship between
the consultant and the company.
(1)
Investigators are limited to a total of 36 consulting days
annually.
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(2)
The consultant’s role must be limited. Services are
restricted to the exchange of ideas; investigators may not conduct
research for a company or direct others in doing so.
(3)
The scope of services must not include research projects
ongoing in the investigator’s HHMI laboratory
(4)
The investigator’s equity interest in the consultee company
may not be “significant.” For this purpose, more than 5% is
always significant, but lesser amounts may also be significant,
depending on the circumstances.
(b)
Protect the investigator’s right to publish the results of his or her
academic research by requiring appropriate carve-outs to the agreement’s
confidentiality provisions;
(c)
Protect the independence of rights in IP developed in HHMI
laboratories
(1)
All IP developed in whole or in part in the investigator’s
HHMI laboratory is specifically excluded out from the
investigator’s obligation to assign IP to the company
(2)
The consultee company explicitly foregoes any preference
in licensing IP developed in the investigator’s HHMI laboratory.
(d)
Ensure that the Institute’s assets are not put at risk as a result of its
investigators’ consulting activities by requiring the company to fully
indemnify the Institute for third party claims arising from the consultant’s
activities.
E.
RESEARCH COLLABORATIONS
1.
Criteria for collaborations. All collaborations with company scientists
must be driven by scientific considerations; that is, the company must make a
direct and substantial scientific contribution, such as a process, a compound, or a
laboratory technique, and the subject matter of the proposed project must be of a
type and scope appropriate to the HHMI investigator’s overall research program.

There is a limited exception to this rule in the special case of start-up companies. In recognition of the rapid
dilution that can be produced by successive rounds of financing, HHMI permits an investigator who is receiving
stock in a start-up company to be issued up to 20 percent of the company’s equity. If at the end of one year
following the first issuance of the stock, the investigator’s holdings have not been reduced to or below the 5% level,
the investigator is required to divest the excess over 5%.
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2.
No consulting. Investigators may not collaborate with companies for
which they consult.
(a)
In the case of clinical investigators, an investigator will be
considered to be “collaborating with” a company if he or she is conducting
research involving a clinical protocol or trial that employs a
pharmaceutical product or medical device produced or under development
by that company.
(b)
For this purpose, conducting research means making decisions or
engaging in activities related to enrollment or clinical care of specific
participants, collecting or analyzing research data, or analyzing or
reporting adverse events. Conducting research also includes reporting and
reviewing research, but does not include consulting on the design of a
research proposal or protocol. It does not include any aspects of patient
care that arise solely from the performance of an investigator’s routine
duties as attending physician on a clinical service.
3.
Documentation. All collaborations with company scientists must be
documented in advance with a written agreement and must also conform to the
policies of the host institution. A copy of HHMI’s model collaboration agreement
can be accessed through the HHMI website.
4.
Ownership of IP. Ownership of inventions conceived or reduced to
practice in the course of the collaborative research project should follow
inventorship, and inventorship should be determined in accordance with U.S.
patent law.
5.
Licensing of Inventions.
(a)
The company collaborator may be granted a time-limited option to
negotiate on commercially reasonable terms for a royalty-bearing license
to use the host institution’s interest in any joint invention.
(b)
License terms should be established through negotiations after an
invention has been made and assigned to the host institution; pre-set
royalties or royalty ranges are strongly disfavored.
6.
Publication. Authorship of papers discussing the results of the
collaboration should be determined in accordance with academic custom.
(a)
The HHMI investigator must have the right to publish the results
of the collaborative project whether or not the company wants to
participate in the publication, subject to protection of the
company’s confidential information.
(b)
Pre-publication review of a publication that is not a joint
publication is acceptable. The pre-publication review should be
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limited to 30-45 days prior to submission of the manuscript or
abstract for publication.
(c)
The non-publishing party may be granted an additional period of
45-60 days prior to publication to protect proprietary information or
intellectual property that might be contained in the disclosure. The total
delay in publication should not exceed 90 days.
7.
Availability of data and material. The agreement should provide that the
parties agree to abide by the policies of journals in which publications will appear
as to such matters as the public release or availability of data or biological
materials relating to the publication.
F.
LICENSING
1.
Rights in all inventions developed by HHMI employees in HHMI
laboratories are assigned to HHMI, which in turn assigns them to the host
institution.
(a)
The host institution takes the lead in deciding whether and where
to patent, identifies licensees, and negotiates license terms, subject to
HHMI review.
(b)
HHMI retains an Institute-wide research use license in all
inventions arising in HHMI laboratories.
2.
HHMI restricts the scope of rights that may be granted to the licensee in
order to avoid pre-committing the fruits of future research in the laboratory.
(a)
The rights to future technology granted in the license may not
exceed hose required to ensure that the licensee will be in a position to
commercialize the licensed invention. HHMI has developed various
formulations to implement this policy.
(b)
In general, these rights include the subject patent(s) and or
patent/application(s), their divisionals and continuations, and claims of
continuation-in-part applications and other patent and patent applications
that are directed to subject matter specifically described in the subject
patent(s) or patent application(s).
(c)
Rights to improvements must be time-limited.
(d)
These restrictions are particularly important (and are stringently
implemented) in cases where the licensee is a start-up company for which
the inventor will be serving as a consultant.
3.
Royalties may not be tied to future milestones to be achieved in the
inventor’s HHMI laboratories.
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G.
IMPLEMENTATION. Policies are developed and refined jointly by the Office of
the General Counsel and HHMI’s senior scientific management. Implementation,
including review and negotiation of agreements, is carried out by attorneys in the Office
of the General Counsel.
III.
ASSOCIATION OF AMERICAN MEDICAL COLLEGES
A.
In October, 2000, Dr. Jordan Cohen, President of the Association of
American Medical Colleges, announced the formation of a Task Force of
Conflicts of Interest in Clinical Research to be chaired by Dr. William Danforth,
Chancellor Emeritus of Washington University in St. Louis. As set forth in the
Preface to the report issued by the Task Force, the Task Force was charged with
“respond[ing] to the deepening public concern over researchers’ perceived
conflicts of interest by forging consensus principles and guidelines for the
oversight of financial interests in research involving human subjects.”1
B.
The report of the Task Force, which was issued in December 2001,
provides recommendations for the formation of institutional policies on financial
conflicts on interest in clinical research and is divided into a statement of core
principles to guide policy development and more specific recommendations to
guide policy content. A copy of the Task Force Report follows.
“Protecting Subjects, Preserving Trust, Promoting Progress – Policy and Guidelines for the Oversight of Idecemper
2001ndividual Financial Interests in Human Subjects Research,” AAMC Task Force on Financial Conflicts of
Interest in Clinical Research, December 2001 at 1.
1
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